When Don Duncan took over as president of the Society of the Plastics Industry Inc. in early 2000, some people wondered if SPI even had a future. The trade group was bleeding money and members and had endured a painful split with the American Plastics Council. Some were questioning the association's relevance.
But SPI hung on, weathering a sharp manufacturing recession, a shrinking budget and a dues increase that came even as member companies were struggling with the worst of the economic downturn.
Now, as Duncan prepares to retire from the Washington trade group next month, SPI officials said the organization has returned to stability. They credit Duncan's soft-spoken, diplomatic style with helping to restore the health of one of the industry's key trade associations.
He helped to smooth the waters with APC, lobbied companies to seek common ground on industry issues such as the Environmental Protection Agency's crackdown on fluoropolymer manufacturing and convinced SPI members to bite down hard and raise their dues to avoid steeper cuts in the organization, officials said.
``He came in at a time when SPI was falling apart,'' said Larry Galpin, an SPI board member and executive vice president of fluorochemical manufacturer Daikin America Inc. in Orangeburg, N.Y. ``He came in and put it back together.''
Duncan, a longtime DuPont Co. executive before taking over at SPI, sat down in his 10th-floor office in Washington recently to talk about what he sees as the industry's key challenges and to reflect on how the industry has changed during his time at SPI.
When Duncan came to SPI, the plastics industry was at the tail end of the boom of the late-1990s. But since 2000, the manufacturing recession and movement to low-cost countries has cost the industry more than 100,000 jobs. Since 1997, the industry's trade deficit has increased threefold, to $20.2 billion.
``The thing that concerns me, and the thing that I don't have the answer to, is that there's been a surge in those exports, whether it is from low-cost production areas or [the North American Free Trade Agreement] or China,'' Duncan said. ``The question is, will that surge die down? Or will we start to see the same kind of thing happening to finished plastics products that we've seen in other industries, like textiles?''
While some argue for tougher trade policies, such as punitive tariffs against China, Duncan said the industry's international competitiveness is tied most directly to the U.S. energy policy.
Soaring natural gas prices have put U.S. plastics at a significant disadvantage, he said, because the natural gas the U.S. industry relies on as a key feedstock has gone up much more than the oil that serves as the building block for much of the rest of the world's plastics.
``When you've got a 300 percent increase in your primary raw material [natural gas] and global competitors have a 40 or 50 percent increase in their raw material base, you can't offset that by being more productive,'' Duncan said.
Thus far, it's proven politically impossible to pass an energy bill, but Duncan said Republican gains in the Senate in the November election increase the chances.
Some in the industry and other trade groups have called for much stronger U.S. government action on another thorn in the side of domestic manufacturers — China's policy of pegging its currency to the dollar, which they say puts U.S. manufacturers at a competitive disadvantage.
A coalition of manufacturers filed a petition with the Bush administration in September asking it to file a complaint against China's currency policy.
SPI, along with allies such as the National Association of Manufacturers, did not join that petition. Duncan said it was unrealistic to think China would float its currency on the world market in any significant amount.
``We understand that's not going to happen,'' he said. ``If they allow their currency to float, the banking system in China would go under.''
Duncan said manufacturers need to focus on pushing Washington for policy changes to make U.S. industry more competitive in areas such as energy, health care and product liability. And he said trade groups need to find ways to help, such as the trade mission SPI has planned for China in June.
``I think the potential exists for further erosion if we don't do something to improve the competitiveness of the manufacturing base in the United States, even with the improving economy,'' Duncan said.
It's a tall order for Duncan's successor at SPI, former Demag Plastics Group executive William Carteaux. He'll have to address those challenges with a lot fewer resources.
SPI's membership, budget take a fall
SPI's core budget is about $8 million, down 50 percent from when Duncan arrived. SPI was forced to raise dues in 2002 to close a $1.5 million hole in its budget.
``We had to take some pretty serious steps to achieve that level of financial stability,'' Duncan said. ``For some of our members that was a 300-400 percent increase [in dues]. We lost 100 members.''
The financial side has not been all bad: The group owns the mammoth NPE trade show, and has been able to make enough money from that to pay about half its core operating budget. And the group said it has been able to wring out savings by doing things like cutting back on publications and delivering them electronically.
SPI's immediate past chairman, Paul Appelblom, said the downsizing of SPI mirrored that of many trade associations and ``absolutely had to happen.''
``To do the right-sizing and sustain the cohesiveness of SPI has probably been his biggest accomplishment,'' said Appelblom, who is president of injection molder Jatco Inc. in Union City, Calif. ``His diplomatic skills were paramount in allowing SPI to regain its strong foundation.''
SPI saw some internal changes under Duncan: It added and then scaled back staff in worker training programs, and the group has had three different top government affairs staffers in the past year.
Duncan said the group has been making moves in recent months to beef up staff, hiring an experienced lobbyist and adding a veteran international trade specialist.
``In some cases we were wasting talent around here - shame on me,'' Duncan said. ``You may say, `Why didn't you do it two years ago or three years ago?' ... Well, we were doing something else two years ago.''
Much of the early part of Duncan's tenure was spent on damage control. He said SPI was left reeling from its failed merger talks with Arlington, Va.-based APC in the late 1990s, and saw many of its large resin companies and business units migrate to APC. Some in SPI hoped Duncan could lure them back, but he was unable to do that.
``The whole unfortunate situation following the APC split caused a significant disruption in our membership base, in some of our affiliated business units, and it took us about two years to stabilize,'' Duncan said.
While it has stabilized, the group remains much smaller. SPI is down to about 1,100 member companies, a fraction of the industry in the United States and well below the 2,000-plus companies SPI could claim in its heyday more than a decade ago, before consolidation and belt tightening cut many trade association budgets.
Boosting membership is ``job one'' at the group, Duncan said.
``We've kind of done a refocusing of our approach to membership,'' Duncan said. ``We're really going to try to target members who we feel can contribute to the industry's programs. ... We're being more selective.''
James Lammers, a lawyer for Dart Container Corp. in Mason, Mich., and an SPI board member, said SPI has struggled to boost membership in what is a fragmented industry. He said the group has worked hard, but has had ``uneven'' success in recruiting one of its targets, midsize companies.
Duncan was able to steer the group through difficult times by listening to people and working to persuade them of what is best for the overall industry, as he did with the group's dues hike, said Frank Tortorici, an SPI board member and a regional group vice president at Arkema Inc. in Philadelphia.
``He took the organization from a relative state of uncertainty and ... he quickly aligned it with the board and the members and the employees,'' Tortorici said. ``He is very effective at working with people and building a consensus.''
While Duncan led the group in difficult times, there have been bright spots. Duncan said he was pleased that SPI has been able to raise $6 million from the industry to launch a plastics exhibit at Walt Disney World in Florida. He said the location in Disney's heavily trafficked Epcot Center is a good platform to present a positive message about the industry.
That could offset any potential negatives as the industry's other big public relations effort, APC's television advertising campaign, is scaled back dramatically and integrated into a larger chemical industry campaign this year. Duncan noted that APC has joined as a contributor to the Epcot project.
Duncan said threats to the industry are hardly waning. Solid waste issues are picking up, particularly in California, as local governments raise concerns about plastic bags, litter and resin pellet pollution.
The challenge in California, Duncan said, is refocusing the debate away from plastic and toward broader concerns about litter.
The industry is likely to see more attention focused on chemical health issues, he said, as European governments and others increasingly push a precautionary approach to chemical regulation.
That's another area where Duncan has applied his diplomatic skills, Galpin said. Duncan got the industry to work together on how to respond to questions about pollution from the fluoropolymer ingredient perfluorooctanoic acid, bridging gaps between companies in the public spotlight like DuPont and 3M Co. and PFOA users that were not facing as much attention, like Daikin, Galpin said.
Different companies wanted to take different approaches with the EPA, but Duncan worked behind the scenes to get the industry to present a unified front, he said.
``He's held the consortium together,'' Galpin said.
Duncan, who came to the job without a lot of Washington experience, said he was taken by surprise by what he calls the ``confluence'' of regulators, environmentalists and class-action lawyers that push public policy, particularly in the PFOA debate.
DuPont paid $343 million to settle a class-action lawsuit over PFOA contamination of drinking water around one of its West Virginia plants last year. While environmentalists argue that such lawsuits are needed when government policy fails, Duncan said the suits make it more difficult to settle issues.
``The most insidious part of this thing, something that I was never prepared to deal with, is the confluence of the environmentalists, the regulators and the plaintiff's bar,'' Duncan said. ``With the plaintiff's bar involved in this thing, it takes the control out of the hands of at least the two principles, the regulators and the regulatees.''
* * *
Title: Retiring as president of the Society of the Plastics Industry Inc.
Former jobs: President and CEO of the DuPont Dow Elastomers LLC joint venture. Managing director of DuPont Co.'s elastomers business unit. President of the International Institute of Synthetic Rubber Producers. Instructor, Marrietta (Ohio) College's School of Business Administration.
Personal: Married to former DuPont manager Betty Shannon Duncan.
*For 2003, the lastest figure available